The New York Stock Exchange (NYSE) is one of the largest and most well-known stock exchanges in the world, but it is hardly the only stock exchange. Stocks are traded around the globe at such exchanges as the London Stock Exchange, the Toronto Stock Exchange, the Rio de Janeiro Stock Exchange, the Bombay Stock Exchange and dozens of other exchanges from around the world. The emergence of high speed telecommunications and the globalization of trade makes it possible for individual investors to trade stocks on international exchanges.
1. Do your research. There are many more factors to consider when buying stocks on foreign exchanges than when buying American depository receipts (ADRs) for foreign stocks through the domestic market. Foreign exchanges may require stock purchases to be made with local currency. Tax laws may require you to pay foreign and domestic taxes on dividends and capital gains. Settlement times may be significantly different from domestic transactions. If you are not an expert in international financial transactions you may wish to consult your broker.
2. Determine the foreign stock you wish to purchase and the foreign exchange you wish to use to complete the transaction. Contact your investments broker and make sure the broker has the ability to place an order with this exchange. If your broker is not able to place such an order, you will need to open an account with an investment brokerage firm that has such capabilities. Place a buy order for the number of shares you wish to purchase. You may place your buy order at the market or you may enter a limit order.
3. Deposit sufficient funds with your broker to cover the cost of the transaction including all associated fees. Transactions made on foreign exchanges are typically made using local currency, so there will be fees associated with converting your U.S. dollars into the local currency. You may have to pay custodian fees to the local financial institution that holds your shares of foreign stock. You will have to pay sales commissions and transaction fees.
- You can gain exposure to a portfolio of international stocks by purchasing shares of an international mutual fund, without the need to trade on international exchanges.
- Investing on foreign exchanges involves at least as many risks as investing through domestic stock exchanges. You may lose some or all of your investment.
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